We assume flexible prices in the long run, but whenever it is costly to change prices (menu costs) or when there are long-term contracts for labor or capital:
a. short-run prices tend to be flexible.
b. short-run prices tend to be sticky.
c. long-run prices tend to be sticky.
d. firms have to pay higher costs and therefore have to raise prices.
Ans: b. short-run prices tend to be sticky.
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Which of the following ideas were central to the conclusions drawn by Thomas Malthus in his 1798 "Essay on the Principle of Population"?
A) Short-run time period B) Shortage of labor C) Law of diminishing resource availability D) Law of diminishing returns
Monetarists and classical economists:
a. assume that stimulative monetary policy will create high levels of GDP without inflation. b. assume that stimulative monetary policy will create high levels of GDP and slightly high prices. c. assume the economy operates at full employment and stimulative monetary policy will only cause the price level to rise. d. assume that the economy operates at full employment and stimulative monetary policy will increase both aggregate supply and aggregate demand. e. assume that the Keynesian description of monetary policy underestimates the true stimulative effect of an increase in the money supply.